Monday Market Commentary: On the Menu This Week in Mortgage Rates

by Alex Stenback on February 28, 2011

Last Week:
Mortgage bond prices marched higher all week as continued unrest in the Middle East and little evidence of inflation or a strong economic recovery sent investors to seek haven in the less risky/volatile bond markets.  As a result, mortgage rates improved about .125 – .25% and are now solidly back in the fours for most borrowers.

This Week:
A meaty calendar with a lot of for investors to carefully masticate.  If we get the filet mignon paired with a sauce suggesting economic recovery, rates could jump.  If the market delivers USDA certified well-done gristle cuts, rates could improve.  Absent any surprises, It would be unsurprising if rates moved up a little – this has been a two week rally, after all.

The Menu:
[As this was being published, PCE, "personal consumption expenditures" for January showed no evidence of inflation, and the Chicago PMI, a proxy for manufacturing sector strength posted the highest reading (71) since 1988]

- Fed Chairman Ben Bernanke sets the table on Tuesday at 10AM ET with his semi-annual update on the state of the economy and monetary policy.  Expect the standard: The economy is recovering but is neither robust nor self-sustaining, and above all is not creating jobs fast enough.  At  the current pace it will take more than 5 years to recover all of the jobs lost in this recession.

Ambiance/Mood:
 The background music is the chaotic tomes still resonating out of the Middle East.  Libya seems priced in, but more spillover trouble in our near majr oil producing states could help mortgage rates.

Appetizers:
- Lots of Fed chatter – Fed officials have ten separate speaking engagements this week, which can and do move markets.

- Congress and the White House risk loggerheads over the final spending-cut bill for the balance of the fiscal year.  Partial government shutdown possible.

Salad:
Beige Book (Wed 2PM ET) - an anecdotal survey of business conditions performed within each district through interviews with key business contacts, market experts and other smarties that the Fed has on speed dial.

Main Course:
Friday’s (8.30 AM ET) employment situation report from the Bureau of Labor and Statistics (BLS).  It is now clear to everyone that jobs, jobs, jobs are what is holding the economy back, and as a result, jobs related data will maintain a position of pre-eminence.  Expectations are that the economy created almost 180,000 jobs in February, which would be the highest reading since April 2010.  The lofty expectations (recent average has been 125K jobs/mo) are due in part to weather depressing the January print, so February will “catch up” (goes the thinking.)

Served with a side of ADP (Wed 8.15AM ET):  The report on Wednesday from leading payroll services provide ADP is widely watched as a sneak preview for the BLS figure – while it can move rates around, the report does not capture govt jobs, and has been but a fairly unreliable predictor of the BLS number.

Dessert:
Sugar and cocoa prices have spiked, so there is no dessert.
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Watching mortgage rates?  Follow me on Twitter for frequent daily updates on the market and other mortgage and real estate related topics.

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